Purpose: The purpose of this paper is to scrutinize the structure of the federal crop insurance program and test whether participating private insurers screen insurance buyers better than the federal agency. Design/methodology/approach: This paper regresses the claim payout on the risk share of...

This paper derives conditions under which concerns about relative income produce rational herding--the shift of individuals' portfolios into the same direction as others'. To endure the generality of results, the model makes parsimonious behavioral assumptions and no assumption about the...

An option is embedded in credit cards. Since credit cards offer open credit lines, cardholders can borrow at the same terms when they become riskier. This option value raises the zero-profit card rate. Furthermore, adverse selection occurs if cardholders are better informed about the probability...